Micro lot
Family I · Instruments
Not to be confused with lot, lot size, standard lot.
Micro lot is a unit of trade size equal to 0.01 of a standard lot, or 1,000 units of the base currency in most currency pairs. It is the smallest position size commonly offered by retail forex brokers, though some also provide nano lots of 100 units. The term describes the quantity of the asset traded, not the value of the position, which depends on leverage and price.[1]
Position sizing and pip value
A micro lot fixes the number of currency units per pip movement. For most pairs where the US dollar is the quote currency, one pip equals 0.0001, so a micro lot of 1,000 units produces a pip value of 0.10 USD. For pairs quoted to two decimal places, such as USD/JPY, the pip value is approximately 0.10 USD per micro lot as well, though it varies with the exchange rate. Brokers may round pip values or apply different contract sizes for certain instruments.
Worked example
Assume a trader buys 1 micro lot of EUR/USD at 1.1000 and later sells at 1.1050, a gain of 50 pips. The pip value is 0.10 USD per pip.
Availability and variations
Micro lots are not universal. The minimum tradable size, the definition of a lot, and the availability of smaller increments such as nano lots vary by broker, instrument and regulatory jurisdiction. Some brokers only offer micro lots on forex and certain CFDs, while others restrict them to specific account types. Traders should check the contract specifications published by their broker or exchange.
Often confused with
- lot
- A lot is a generic term for any standardised trade size, whereas a micro lot is one specific size equal to 0.01 of a standard lot; the visible sign is the numerical multiplier: a lot can be any size, but a micro lot is always 1,000 units of the base currency.
- lot size
- Lot size is the general concept of the number of units traded, while a micro lot is a named, fixed lot size of 1,000 units; the visible sign is that lot size appears as a variable in position-sizing formulas, whereas micro lot is a constant label.
- standard lot
- A standard lot is 100,000 units of the base currency, while a micro lot is exactly one-tenth of that, or 1,000 units; the visible sign is the ratio 0.01 or the unit count 1,000 versus 100,000.
See also
References
- ↑ Contract specifications published by the broker or exchange for each instrument. Lot sizes, tick sizes and pip values are set per instrument and differ between venues; read the specification for the symbol you trade.